Book Club #13: Start with Why by Simon Sinek

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WHYIn 2009 Simon Sinek published a book called Start with Why. That same year he gave a TedX talk which at the time of this article had 36,000,000 views. Why such interest?  

He hit on a powerful notion that isn’t just valuable for a business owner who wants to connect more thoroughly with a customer, but with employees as well.  

Sinek uses Apple because its success and cult-like following are both accepted and legendary.  

He points out that most businesses start at “what” and work into towards “why.” Framing as Apple, this would look like:

“We make computers” – what

“We focus on style and design” – how

“We like to challenge the status quo” – why

That sounds nice. But it’s just like every other pitch out there. “We make cars. They are well designed. Would you like to buy them?”  Sinek points out that the neocortex of our brain engages with what and is very logical.  

But the limbic part of our brains, the parts that know about loyalty and trust and do not have language functions, those are connected with how and why. Sinek then reframes:

“We challenge the status quo in everything we do.”

“One of the ways we do that is by building computers that are designed beautifully.”

“Want to buy one?”

By starting with why, Sinek says that you can acquire customers who think like you (and your business). If they believe in your mission, they will buy anything you want to sell them.  

That’s why Apple doesn’t just sell computers. They sell music players and headphones and tablets and in the near future, perhaps cars. They are operating in your limbic brain, and that’s why you see advocates of their products in contrast to the “whatever works” attitudes of the customers who use other products.

This also allows you to hire employees better, aligning them with your cultural fit. If you hire people who believe what you believe, then it doesn’t matter what tasks you assign or projects you want to tackle – they are with you because you started with why.

As a new year dawns, consider a different way of looking at your business, not just in how you face your customers, but how you face your employees. And you might get to add some of that “can’t explain it” loyalty and excitement that companies like Apple and Tesla generate to add to the things you’re already doing well.

How SCORE Can Help You Build Your Business

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mentoringSCORE, the Service Corps of Retired Executives, is a nonprofit supported by the SBA that offers counseling advice to business owners.

It’s powered by a network of 10,000 volunteers, mostly successful business owners and executives, who still love the sport of business and want a chance to help younger versions of themselves.

Because of the SBA funding and volunteer labor, a lot of this mentoring comes at no cost, whether in person at a local office, via email, or by video. They also offer workshops in person and on the web.  

While many entrepreneurs may form ad hoc advisory boards or lean on the advice of savvy investors who may be partnered with them, many more don’t really have a network to turn to in the early days.

SCORE can match that entrepreneur with someone of relevant experience or sometimes in the exact industry.  

Indeed, as you browse through the numerous success stories on their website, you get a sense of how diverse the mentorship can be… sometimes something as short as a few months, other times as long as a few years.

For example, Mutt’s Sauce was a Tennessee-based condiment company that had developed a local following. But when the recipe passed to his granddaughter after he passed away, with no other infrastructure or help, she turned to SCORE.

She got connected with someone who not only mentored her in how to start a food manufacturing business, but who also connected her with the right contacts to get her launched properly.

Sometimes it isn’t a new entrepreneur that needs mentorship, but one who has had a business for awhile and has run into a problem Karoun Yoga was just such a business, and after an initial explosion in growth, she found herself “drowning in expenses.”  

Her SCORE mentor walked her through Quickbooks so she knew her numbers better and she learned how to create financial reports that she not only understood but could use to improve her company. She also attended workshops on Google AdWords put on by her local SCORE chapter.

Even immigrants can benefit from SCORE, as Diego Tantardini discovered. He had two SCORE mentors meet with him regularly to go through numbers and helped him work on small-scale business plans, figuring out product/market fit.

What SCORE ultimately provides is trusted, dispassionate mentorship from those who’ve been there. If you’ve been wondering about mentorship as you build your company, it might be worth giving them a look.  

At Apex we can also provide you with connections to professional business coaches, networking groups, and other professionals to get you the help you need.

Case Study #13: Bought by the Competition

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competitionMark Carlson bought Minnesota Mailing Solutions in 1998 for around $1M and grew the business over 10 years, eventually selling it for $4.5M.

It was his ability to stay unemotional and focused on business fundamentals that ensured he walked away with the best offer possible.

In 1998 there was still a very large market for what Minnesota Mailing Solutions was offering: products that supported large-scale automated mailings for companies (think folding and inserting machines, with giant meters at the end of the assembly line).

Mark took the 6 employees and the inventory the business came with and went about growing the business.

In 2008 Mark saw two developments which triggered a desire to sell. The first was consolidation within the postage meter industry.

A merger shrunk a field of four USPS-sanctioned players to three. The second was a major and ongoing decline in the volume of first-class postage and sale of equipment.  

This led the three remaining players to look for profits as growth slowed. That’s when the idea of opening their own corporate stores that would compete with their own dealers (like Mark) became attractive. Indeed, they were able to track from an entire history of numbers just how well certain markets could do.

Mark decided to bring in a broker to help him navigate the sale unemotionally and thoughtfully. When the broker first solicited offers, both buyers lowballed, trying to get the most for the least. After declining both of the offers (around $3M), Mark and the broker went back to the fundamentals. How was the business being valued?  

Mark was using the same reasoning as when he originally bought the company: around 1X annual EBITDA plus inventory. He was doing around $4.5 million in annual revenue and had a small inventory and that was what he wanted. They went back to the buyers with the reasoning and the buyers also had realized now that they were bidding against each other.  

The smaller player between the two had been Mark’s dealer for 10 years, and their fatal mistake was in thinking this was an emotional play. At one point, the remark was made to Mark’s broker, “Mark is loyal to us; he’ll never sell to them.”  Them, in this case, was the biggest player in the industry and had been Mark’s direct competition for years.

Despite his broker dropping numerous hints that the bigger player had come in higher, that company didn’t increase their bid, and Mark took the better offer, which was greater by a magnitude of $500,000.  

He got a 98% payout with 2% contingent on the inventory holding up in an audit, which it did, and three months after the deal closed he got that 2% as well. He also stuck around for three years on salary, transitioning the company into the new products and the buyers’ way of doing business.

An unfortunate epilogue to this otherwise happy ending for Mark, who had built great value in a business that traditionally featured 15% net margins, was a frivolous lawsuit from the buyer who had lost out on the deal.  

Like a spurned lover, they reacted emotionally (precisely what Mark had avoided) and accused Mark of taking trade secrets, etc. After about a year of depositions and $100k in legal costs, the case was (unsurprisingly) dropped after the tantrum ran its course. But it’s a good thing to note that even if you’re able to remain unemotional, others may not.

Key takeaways:

  1. Know your numbers. The reason Mark was able to get even more money after receiving offers for 3X what he paid for the company was because he truly understood how his business worked, even in a declining market.
  2. Watch for signals. Mark saw the writing on the wall and rather than panic or avoid action, he moved and capitalized.
  3. Know your values. Everyone will approach the “loyalty” question in this story differently, but Mark didn’t decide his values during the transaction. He knew ahead of time, and they guided him to a successful conclusion.

Book Club #12: The Dip, by Seth Godin

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quitSeth Godin has been a prolific blogger and author for many years now. He is particularly dedicated to helping entrepreneurs grow their businesses and develop robust mindsets. 

The Dip, which has a subtitle that promises to teach you “when to quit and when to stick” develops a very specific theme across its 96 pages.

Seth explores a theme which was covered in a wildly popular Freakonomics Radio episode from 2011: quitting.  The premise that is questioned is simple: Is it true that “winners never quit”?  

Seth’s answer is quite emphatically “No.”  Winners quit all the time, and he gives stories about a number of famous business people to back up his argument.  

What is “The Dip”?

Simply, the dip is the hard and difficult road between being barely competent in something and being the best in the world (Seth argues that being the best in the world should be a primary goal).  

There are only a few spots at the top, Seth notes, and you should be okay with quitting if it’s not clear to you that a) you have the desire to get to the top or b) you have the ability to do so.

Now, while we don’t share Seth’s idea that “best in the world” is the only goal possible/desirable, we would argue that high levels of personal satisfaction and competence should be at the end of the road. You need to be okay with quitting, and quitting quickly, if those aren’t on the horizon. Hope is not a strategy.

Persistence is Overrated

Perhaps the biggest lesson in this short book apart from giving people “permission” to quit (against all the social pressure not to) is to remind us that persistence isn’t everything.  

People can keep pounding their heads against the walls for many years for nothing other than the alleged “virtue” of persistence for its own sake. Seth is reminding us to make sure we’re clear on what our “why” is.

If we know why we’re doing what we’re doing, combined with a realistic look at whether we can accomplish our goals, the persistence will make sense and be the best part of the journey. Otherwise, it can be the anchor that holds us back from so many other possibilities.

As one year closes and a new one opens, it’s a great time to audit our lives and ask if there are any things in our business or personal life that need quitting, once we’ve given them “the Dip” treatment.